Despite rising more than 300% in one year, Micron stock looks cheap. But is it a purchase?

stock micron technology (M.U. 2.28%) We have continued our historic journey. As of this writing, the stock has risen more than 300% in the past 12 months, riding huge demand for the specialized memory chips that power artificial intelligence (AI) data centers.

But what’s surprising is that despite the sharp rise in the stock price, Micron’s valuation still looks attractive. And considering analysts’ consensus earnings forecasts for the next 12 months, it looks like a bargain.

But investors need to think long term. How long can this supply-demand imbalance last? And how long can Micron maintain this incredible pricing power? The unknowns surrounding these questions may help explain why the stock has been under pressure recently (shares are down more than 14% in a week) despite the company reporting surprising fiscal second-quarter results.

Image source: Getty Images.

amazing growth

Micron’s fiscal second quarter revenue increased 196% year over year to $23.86 billion. Equally impressive, this represents a 75% sequential increase from the previous quarter.

Profits grew even faster. Micron’s adjusted earnings per share were $12.20, up 682% year-over-year.

“Our quarterly revenue nearly tripled from a year ago, with sales for DRAM, NAND, HBM and each of our business segments hitting new highs,” Micron CEO Sanjay Mehrotra explained during the company’s fiscal second-quarter earnings call.

Of course, the key driver is aggressive infrastructure deployment to support generative AI. These workloads require massive amounts of high-bandwidth memory (HBM) and data center solid-state storage.

As hyperscale players compete for supply, Micron’s production cannot keep up.

Jaw-dropping views

And the company’s guidance is even more unconventional than its recent momentum. For the fiscal third quarter, management expects sales of about $33.5 billion. And Micron reported an adjusted gross margin of approximately 81%, up from approximately 38% in the third quarter of fiscal 2025 and 75% in the second quarter of fiscal 2026.

These are astonishing numbers, not only for hardware manufacturers but for any type of company. This reflects an environment where demand far outstrips supply, and buyers are willing to pay almost any price to secure parts.

Of course, this pricing power directly impacts your bottom line. Management expects earnings per share of $18.90 for the fiscal third quarter, up from $1.68 for the third quarter of fiscal 2025 and $12.07 for the second quarter of fiscal 2026.

Taking this into account, the company’s projected profit for a single 90-day period now dwarfs its full annual revenue from the previous year.

Pitfalls of Valuation

This brings about the valuation of the stock.

Based on the company’s trailing 12-month earnings per share, the stock trades for approximately 19 times earnings as of this writing. For a stock growing as fast as Micron, this already looks cheap. But where the stock looks incredibly cheap is on a forward price-to-earnings basis, a valuation method that uses a stock’s price as a multiple of analysts’ average forecasts of earnings per share over the next 12 months. Micron’s forward price-to-earnings ratio is just 8.

But does this single-digit multiple for a cyclical semiconductor stock look like a screaming buy signal? Playing devil’s advocate may actually be a glaring warning.

The market is looking into the future and assuming that this level of pricing power cannot be sustained.

Memory chips have historically been a commoditized market. Periods of supply shortages ultimately fund large-scale capacity expansions, which inevitably lead to oversupply, plummeting prices, and plummeting margins.

Today’s AI infrastructure requires enormous amounts of high-bandwidth memory, but there is significant uncertainty about what the future memory market will look like on both the supply and demand side.

today’s change

(-2.28%) $-9.21

current price

$395.14

Key data points

market capitalization

$456 billion

work range

$388.91 – $404.84

52 week range

$61.54 -$471.34

volume

1.6 million

average volume

37M

gross profit

58.54%

dividend yield

0.11%

Watching from the side

Ultimately, a stock isn’t a clear buy just because it has a single-digit forward price-to-earnings ratio. The market is smarter than that.

There is a risk. If cloud providers and tech giants eventually pause building AI data centers to digest recent capital spending, Micron’s revenue and gross margins could shrink as quickly as it expands.

Given the unprecedented nature of this AI boom, the exact timing of the cycle shift is not yet known. For that reason, I think it makes sense to stay on the sidelines. The stock may look cheap, but acquiring a cyclical hardware business that can command close to top margins is always a risky game.